TFSA: Just The Facts Ma’am

Here are the most important facts about the Tax Free Savings Account. Will blog further on this tomorrow.

Introduction of the Tax Free Savings Account: January 1, 2009, right at the height of the economic meltdown

What’s new: Stephen Harper promises to double the contribution limits to the Tax Free Savings Account, from $5,000 a year to $10,000.


Average After-tax income of Canadian individuals in 2008: $31,400

Median after-tax income of Canadian individuals in 2008: $25,400

Drop in number of full-time jobs in the recession, from peak to trough:
465,000 (in seasonally adjusted terms)

Proportion of Canadian households that saved in 2009: 57% (43% did not) (Source: Statistics Canada, custom data ordered by CCPA, to be released soon)

Cost of TFSA to public treasury, as estimated by Budget 2008: $920 million over first five years of implementation, $3 billion a year upon full operationalization

Number of accounts by end of 2010: 4.8 million

Eligible population (18+): estimated to be approx 26 million

Proportion of Canadians who took advantage: 18% (would be a lower share of all Canadian households, since some families will have several members with accounts)

Amount of money in TFSA accounts by end of 2010: $19 billion

Canadians’ Number One Concern: Healthcare

Canadians’ Second Concern: Jobs


  • Let’s be clear that $3 billion annually is the projected cost of TFSAs to the federal treasury. Since TFSAs also avoid provincial tax, they could easily cost provincial treasuries a further $1.5 billion annually.

    Doubling the contribution limit would not quite double the cost since more people can afford to contribute $5,000 than $10,000. But between it and income splitting, the Conservatives are promising to punch a multi-billion-dollar hole in future federal and provincial budgets.

  • Hi Armine,

    Just a couple of questions. Of the 4.8 million with TFSAs, how many are actually saving the max and who are they income bracket wise? In other words, by increasing the max level of contributions, who benefits – seems like it could be a small number?


  • Armine Yalnizyan

    Hey Lana
    I trust the answer to your question is clear in the next post, Who Benefits from the TFSA?.

    A bit more about this important question:

    The number of people and the amount they put into their accounts won’t register with CRA statistics (tax stats). The budgetary impact will never be published in an annual tax expenditure or pubic accounts report.

    So no public record of the impact of this measure, but the information is out there, in the private sphere. The banks have it: the number of accounts, the amount deposited in each annually. Not obliged to share it of course, but that’s where Flaherty got his numbers for the statement that I cite on the numbers and amount of assets. So if they want to talk about it they will. If not, well, none of our business I guess.

    Furthermore, don’t think there is any system that will ever link accounts to show what a small number of families benefited from the full tax saving room – and the TFSA is designed in a way that encourages people to turn their family into a tax shelter.

    As soon as they turn 18, I give my kids the max and my financial advisor invests it to get the highest returns, pooling with other deposits put aside in the family.

    The returns can pay for grandkids’ education or subsidize/upgrade housing options or whatnot, thanks to the willingness of the Canadian electorate to shield the growth in unearned income through investments from taxes.

    The grandkids get to take a ride on an even bigger gravy train, through the magic of compound interest.

    Holy shades of plutocracy batman! No wonder it was hailed as a “revolutionary” new tax reform by accountants and the financial industry.

    We introduced inheritance taxes and high marginal tax rates to stop this sort of thing – not sure if introduced in the wake of World War One, when income taxes introduced; or in the 1940s, during World War II. Repealed in 1972 by Trudeau, and replaced by a capital gains tax.

    Yes anyone who can save can take advantage. But it’s not for the average joe (at an average after-tax income of $31K, whose going to put aside $10K????) And just because lower income people contribute the max doesn’t mean they are thrifty. It could mean someone else is supporting them.

  • Wow I never thought I would see the day when the “progressives” come right out and admit the focus of their ideas to prevent the success others through their own initiative and thrift.

    It is wonderful that a family can achieve significant wealth in a couple of generations by saving relatively small amounts of money.

    Somehow I save almost 10k per year despite never earning more than 45,000 per year… put down the fancy cell phones and pick up a library card.

    I think it is also odd for an “economist” to refer to investment earnings as “unearned”. To get this return I have to do two things… 1. I have to part with ownership of the cash for a period of time, this of course is opportunity cost I incur. 2. If I invest looking for higher returns I need to take risk.

    Structures like the TSFA allow a regular working guy like me the chance to better my families financial condition both now and over time.

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